Exton Square owners win assessment ruling

WEST CHESTER – Common Pleas Senior Judge Thomas Gavin ruled in favor of the Exton Square Mall’s appeal of its 2010-2011 property tax assessment, creating a possible long-term loss of revenue for the West Chester Area School District, which had argued against the appeal.

Gavin, in a ruling made Friday, agreed with the mall’s real estate appraiser that the assessed value of the 39-year-old regional mall was $52.6 million, far below either the Chester County Board of Assessment’s value of $62.5 million and the school district’s calculation of $62.3 million.

Gavin said in his decision the district’s expert, Michael Samuels, had been too optimistic in his outlook for the future of the mall, noting he had not taken the years of economic turmoil suffered by the Exton Square through business downturns and competition with the King of Prussia Mall complex into account.

Samuels’ approach, Gavin wrote in his 13-page opinion, was “that of a person who always sees the glass half full as opposed to that of half empty.” In his evaluation overall occupancy at the mall, Samuels’ estimate of 85 percent was far off the mark, the judge said.

“To accept his vacancy rate one must assume that the business climate is improving, an assumption that is not, in my view, supported by the objective evidence and/or the prevailing business climate,” Gavin wrote. “Indeed, the historical data supports the opposite conclusion, i.e, conditions are not improving.”

An attorney for the mall, Peter J. Picotte of the Philadelphia firm of Dilworth Paxson, declined comment on Monday, saying he was not authorized to do so by his clients. The mall is owned by the Pennsylvania Real Estate Investment Trust, or PREIT.

Robert Partridge, a spokesman for the school district, said officials there had seen the decision and are studying it. But he declined to comment on the decision itself.

“We are evaluating the ruling and asking what our next step might be,” Partridge said Monday. “We’ve got a lot of work to do.”

The lesser-assessed value rate would mean the school district would lose $180,000 or so in property tax revenues from the mall.

The district would be forced to subtract the amount from its 2012-2013 budget, which the school board has already adopted.

Beyond that, the district will also have to either refund or credit the mall the difference in what it paid in property taxes under the old assessed value in 2010-2011 and 2011-2012.

One participant in the case pointed out the new assessment will not apply only to the coming year, but all years going forward, no matter whether the economy improves, stays the same, or worsens, until or unless the Chester County commissioners decide to reassess all properties in the county.

“This could be a significant amount of lost revue,” the participant, who asked not to be identified, said Monday.

The county and West Whiteland township, where the mall is located, would also see less revenue from the mall’s property tax bills, but at a lower cost than the district, which is the largest taxing authority of the three local governments.

In a hearing before Gavin earlier this year, the mall owners argued that the downturn in the economy has reduced the mall’s overall rental income, and that the property is now worth approximately $95 million, not the $112 million-plus that the school district contends is its fair market value.

Gavin heard testimony and arguments over the dueling assessment estimates on Jan. 18 and 19.

A recent walk through the mall would seem to back up PREIT’s argument that Exton Square has been negatively affected by the economic downturn. At least 20 retail spaces at the mall are vacant, and gone are formerly popular businesses like The Disney Store, Suncoast Video and Houlihan’s Restaurant.

The mall is one of a small number of large Chester County property owners that have appealed their property tax assessments for the 2010 year. The Vanguard Group currently has a case before Judge Mark Tunnell, although because of the difference in use between the mall and the financial giant’s building, Gavin’s decision is not necessarily expected to have an impact on that case.